Packer buys his way out of US casino troubles

By Vanda Carson

14 March 2009 — 12:00am

JAMES PACKER'S Crown has agreed to fork out the best part of $US400 million ($617 million) to save the company from having to go ahead with a $US1.75 billion US casino deal made at the top of the market.

The suite of three casinos Crown had agreed to buy have plummeted in value since Crown signed an agreement nearly 15 months ago.

The compromise deal is a face-saver for both sides and was welcomed by the market with shares in Crown closing up 70c, or 13 per cent, to $5.90.

The deal came after intense negotiations between Crown and Millennium Gaming Inc, which owns the casinos - two in Las Vegas and one in Pennsylvania.

Millennium has been threatening to sue Mr Packer's sister, Gretel, for a "significant" amount, believed to be more than $US1 billion. Gretel Packer's decision to pull out of the running for a casino licence in Pennsylvania was the turning point which gave Crown bargaining power to renegotiate the terms of the deal.

Advertisement

Millennium has forced Crown to go ahead with the sale, which Crown could have scuttled completely on a legal technicality. Crown can now reassure shareholders by not paying top dollar for assets with little growth prospects in the next year.

Yesterday's compromise allows Crown three options: a minority stake (if the regulator in Nevada or Pennsylvania rejects its application), a 25 per cent stake, or full control within two years with a minimal break fee.

If regulators don't approve the new deal, Crown will be forced to pay a total of $US290 million made up of break fees and the price of a compulsory 4 per cent stake.

The collapse of the initial deal, and its replacement with the new terms means Crown will have to wait before gaining a US presence. It is the second time Crown has failed to realise ambitions in the US. In June financiers failed to support James Packer's ambition to build the world's tallest casino in Las Vegas.

Provided regulators approve the deal Crown can pay a total of $US370 million to delay the settlement of its purchase of the three US casinos for as long as two years.

Of this, $US320 million will sit in an account ready to be converted into a 24.5 per cent stake in the company, when market conditions improve.

At the time the deal was struck in December 2007, Mr Packer said in a statement that the casinos were "first-class" and they were in "markets with attractive, long-term growth prospects".

Crown chief executive Rowen Craigie described the deal at the time as "strategically and financially compelling for Crown" because of its aim to become a substantial player in the US market. Mr Craigie said it was "an entry point into the US locals casino industry", and analysts saw it as a springboard to further deals in the US.

A Crown spokesman, Geoff Kleemann, yesterday refused to comment when asked if James Packer had squandered his inheritance with his failed attempts to expand his casino empire into the US.

Asked why Crown had decided to invest in the US in 2007, Mr Kleemann said that "we didn't know it was going to get this bad, tell me who did".